Car dealers applaud clunkers program as big shot in the arm
— -- David Hersrud's small Chevrolet dealership in Sturgis, S.D., had shriveled so much from lack of customers this year that he was considering selling some of his inventory to other dealers at wholesale.
"We were getting a little nervous," he says.
Then the federal cash-for-clunkers program kicked in July 24, and Hersrud did a month's worth of business in just six days last week.
Cash-for-clunkers — officially the Car Allowance Rebate System (CARS) — helped more than Hersrud. It's credited with turning around business at dealerships across the country and resulted in Ford Motor's first monthly sales increase since November 2007.
"Without cash-for-clunkers, we would not have had a year-over-year increase" in July sales, Ford Vice President Ken Czubay said Sunday. Automakers report July sales Monday.
CARS provides government discounts of $3,500 or $4,500 to people who trade in older vehicles with poor fuel economy for new ones that do better. The amount depends on how much better the new one is.
It's "the stimulus program that has worked better than any other stimulus program," Transportation Secretary Ray LaHood said on CBS' The Early Show Saturday Edition.
But the program, intended to run until Nov. 1, already has run through its $1 billion budget. The House quickly voted Friday to give it $2 billion more. But it's unclear whether the Senate will follow this week. That leaves dealers like Hersrud wondering whether they'll get paid for tens of thousands of transactions they've already written — and whether to keep writing them.
Also key: Is CARS' explosive success the sign of a turnaround for the auto business or a one-time surge that quickly dried up the pool of potential buyers?
The program's success "seems to confirm a very large degree of pent-up demand" for new vehicles, Himanshu Patel, a JPMorgan auto-industry analyst, told clients in a note Friday in reaction to news that the program was fast running out of money.
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